Brewer Jamie Hancock is having a "moment". He is recalling the occasion, 10 years ago, when he tasted Magic Hat #9, his first proper, hop-loaded, American pale ale. "I was working in a pub in Leicester that was starting to get in Goose Island and Sierra Nevada, but that Magic Hat was like: 'Bloody hell, this is a totally new thing.'"

At the time, Hancock drank Belgian beers and traditional English cask ale, but the imports he was beginning to come across from the burgeoning US "craft beer" scene had a revelatory intensity of flavour. "It was the fruitiness of the hops. You can get those flavours with British hops but you have to use absolutely loads, whereas American hops are intense with pine, orange and big citrus flavours." Today, those flavours are everywhere in the UK. Over the past decade, the headline news about British beer has been grim: 31 pubs close every week; UK alcohol consumption is falling; we are drinking less beer. But among a new generation of grassroots beer fanatics, the story could not be more different. The past few years have seen a huge upsurge of excitement around creative brewing and radical new beer styles. Britain is now firmly in the grip of its own craft beer revolution.

BrewDog beers.

Hancock and I are in Port Street Beer House, Manchester, drinking pints of Aurora from Sussex brewery Burning Sky. Port Street is one of a rapidly growing number of bars pushing "hop-forward" beer, just as Burning Sky is one of the many new-wave breweries – around 200 are opening each year – now using those once-exotic, potent US hops. Forget real ale, with its apologetic beers and traditional branding. In 2014, microbrewed beer is all about bold flavours and cool packaging. The latest annual report from the Society of Independent Brewers talks of "a new breed of British microbrewer adopting the entire persona and modus operandi of the American 'craft brewer'". Beer writer and industry expert Pete Brown could not be more excited: "I flip between saying, 'It's the best time ever to be a beer drinker,' and 'It's the best time in our lifetime.' I can't quite decide if it's better than the 1870s. But it's up there."

Quantifying how big craft beer is, separating the hype from the hard sales data, is difficult. Unlike real ale (which undergoes a secondary fermentation in the cask), there is no clear definition of what craft is. It can be cask, keg, bottled or canned, and is as likely to come from Scandinavia as Salford.

Brew By Numbers beer.

"It's all about flavour, not format," says Brown. However, clearly something is happening – just look at the increasing numbers of US and UK craft beers in supermarkets, or the popularity of once-marginal BrewDog and Meantime beers in high-street bars and restaurants. Last year, food and drink analysts GCA Strategies calculated that craft beer was growing at 79% a year. The direction of travel is clear, says Brown. "Every big global brewing corporation is looking at craft beer and saying: 'How do we respond to this?'"

For a significant minority of people, this explosion of interest in beer has already been life-changing. In 2011, Hancock started his own brewery. He now runs Five-Oh Brew Co from his garage and works at another new Manchester business, Beermoth, one of a fast-growing network of independent craft beer off-licences. At 40, he's older than many new brewers but, with his beard, tattoos, piercings and Godflesh T-shirt, is a colourful example of the cultural change that the craft beer scene kick-started. Real ale struggled to shake, as Brown puts it, its "old man, flat cap" image; craft beer is young, urban and fashionable.

Meantime beer taps. Photograph: Casey Gutteridge

The London Craft Beer festival embodies that shift. Held at the Oval Space from 14-17 August, it combines credible bands, DJs and quality food with good beer. Some 3,000 people attended last year, the majority of them twenty- and thirtysomethings and 30-40% of them women. "Unheard of at a beer festival," says co-founder Greg Wells. Here, as at Indy Man Beer Con in Manchester, the stars of UK and international craft brewing (some idolised like rock gods) man their own bars and treat their followers to various one-off, experimental and rare examples of their work. Innovation is a key feature of the craft scene. "This company was born out of a desire to experiment," says 31-year-old Tom Hutchings, co-founder of Brew By Numbers, one of a cluster of renowned Bermondsey breweries. "We'd always make a base beer, be it a saison, golden ale or IPA, then split it and do experiments on it with different types of yeast, hops, fruits – whatever we had."

To craft beer's detractors, BBNo's cucumber and juniper saison or its keenness to use wild yeasts (which impart unpredictable off/funky flavours) encapsulate a scene that has disregarded centuries of British brewing tradition to produce expensive novelty beers for bearded hipsters. "This is how I've dressed for 20 years," counters Hancock, adding: "The craft beer scene wouldn't have exploded the way it has if it was only hipsters who liked it." Self-confessed bearded hipster Wells is more combative. "You'll see a broad range of people from all parts of London [at LCBF]," he insists, adding that if people want to tag him a hipster: "I don't really give a shit. To me, that means I like looking for things that are well made and have interesting stories behind them."

Ken Grossman, co-founder of the Sierra Nevada Brewing Company.

As for the price of craft beer, Brown says there are legitimate reasons why certain beers are costly ("If I'm drinking a Stone barrel-aged IPA from California, I understand why it's £9 a pint,"), while railing against the "opportunism" – generally, third-party distributors, bars and restaurants adding unreasonable markups – that means even average craft beer can, increasingly, cost £5 a pint.

Is craft beer cultivating a new British drinker found nursing pricey halves all night? Wells thinks not, predicting that prices will stabilise: "It's a young industry, there's a maturation process. We have a distinct beer culture in this country. We're pint drinkers."

Such issues are often portrayed as a generational stand-off. Craft's biggest player, BrewDog (turnover last year about £20m), has marketed itself as a band of plucky young punks fighting the old fogies at the Campaign for Real Ale. The reality is more complex. At its festivals and in the Good Beer Guide, Camra pushes cask beer almost exclusively; keg beers, such as BrewDog's, are banned. But individually, many Camra members enjoy those beers and a spokesperson strikes a conciliatory tone: "We're not blind to developments and it's great to see so many new breweries producing great beer. We will always promote cask beer, but anything attracting new drinkers to the joys of beer has got to be a good thing."

Not that craft beer is having it all its own way. Contemporary craft beer bars, with their loud music, beer cocktails and extracurricular meet-the-brewer events, may be opening nationwide, but so, at a slower rate and with less fanfare, are "micropubs" – generally tiny, enthusiast-run pubs that tend to favour cask beers and eschew music, TVs and the like. The first opened in Kent in 2005 and there are now about 60 nationally, with a handful opening each month. The Micropub Association co-founder Stu Hirst describes the movement as: "bringing back a sense of community fuelled by quality cask ale, lively banter and the occasional pickled snack".

For talented craft brewers, whoever is buying their beer, the picture is rosy. They cannot brew fast enough and, while running a microbrewery probably won't make you a fortune (a brewer can expect to earn around £20-£25,000 a year), those involved rave about a tight-knit community eager to share knowledge, kit, even prized yeasts. "Everyone is dead helpful," agrees Hancock. "There's competition, but it's between mates. We're bouncing off and learning from one another."

The question now – in a country where 75% of all beer sold is still mainstream lager – is how big can craft get? Who will satisfy that growing demand? Many of the big regional cask brewers have already set up offshoots and sub-labels to produce craft beers. These have been met with, at best, modest acclaim and, at worst, outright derision. Craft drinkers jealously guard the integrity of their scene and are ruthless in their criticism of anybody deemed to be cashing in or selling out.

Larger companies who want a slice of the craft action would be wiser, perhaps, to offer logistical assistance and investment to small, independent craft breweries, but otherwise leave them to it. BrewDog recently bought a £50,000 stake in BBNo as part of its new brewery investment fund. In Glasgow, Tennent's has opened the Drygate brewery and bar with craft outfit William Bros. In the US, AB InBev, owners of the reviled Budweiser, bought Goose Island brewery and, after installing a modern bottling line, are said to have improved its beers. Budweiser made Goose Island IPA a better beer? Pete Brown laughs: "It's heresy, isn't it? But it is technically true."

Whichever way craft beer grows, Brown is convinced that the momentum is now unstoppable: "We're at the start of something that will be mainstream one day. Even if it's only people moving from Foster's to Sierra Nevada pale ale, there is going to be a significant, permanent shift." A better choice and bigger flavours? We can all drink to that.

Coverage of London's craft beer scene tends to focus on pubs in the east and north of the capital, neglecting the area where most visitors end up: central London. So here's Tony Naylor's guide to the best boozers in Soho, Euston, Covent Garden and Clerkenwell